Newport Commission Nixes Log Shipping Agreements

Controversy over a pending contract and related agreements to bring log shipping back to the Port of Newport, Oregon refuses to ebb, but the port’s board of commissioners recently rejected several of those agreements, giving concerned commercial fishermen what they say is a reprieve, however long, from a “potentially bad deal,” not just for the fishermen, but for the port and the community.

Competition for dock space between logging and commercial fishing interests during specified times of the year at the port’s refurbished international terminal in Yaquina Bay was the catalyst for the controversy, with both sea-going and land-based jobs and livelihoods on the line.

The last log cargo ship sailed away from the old terminal dock – built in the early 1950s – in 1999, leaving port officials searching since then for other ways to boost revenue while trying to revive shipping as part of a diversified enterprise portfolio. In 2006, port district voters approved a $15 million general obligation measure designed to remediate intensifying environmental concerns caused by the failure of the aging, dilapidated terminal’s foundation, and to rebuild the facility to serve both the commercial fishing fleet and deep-draft shipping.

A primary focus was the added revenue and other competitive advantages the return of deep-draft cargo shipping could bring.

Source of Tension

Timber and woodlot owners on Oregon’s central coast currently export logs through facilities on the Columbia River at Portland or at Coos Bay. Shipping from Newport would provide significant savings in transportation costs. Astoria, Oregon-based Teevin Brothers Land and Timber Co. first proposed building a log exporting yard at the Newport terminal in 2010, but the “new and improved” facility didn’t open until August 2013.

In 2014, port commissioners approved a memorandum of understanding between the port and Silvan Forest LLC, a Bellevue, Washington-based broker with facilities in Coos Bay, Oregon and six other locations in the Pacific Northwest. Silvan agreed to pay $2.5 million into an escrow account that the port could use to build a staging facility. Teevin, Silvan and the port – along with Bellingham, Washington-based Rondys Inc., which owns a 40-acre parcel at McLean Point adjacent to the terminal - wanted to forge a public-private partnership to construct the new shipping facility at the terminal and return log shipping to Newport. Rondys officials said they would pursue “a multi-phase project” with an initial investment of $3 million.

Construction, permitting, dredging, and funding issues delayed the process at various times. But the biggest obstacle arose when commercial fishing groups realized that the plans as outlined could seriously impede their use of the terminal docks, and they expressed their concerns, both privately and publicly at several port commission meetings.

Facing the Fleet

Fishermen say they know diversity is critical to the port’s operations, and international trade is a vital part of that diversification, but so is the fishing fleet, which has been there to fill the docks and support the port in the nearly two decades since cargo shipping ceased.

Heather Munro Mann, executive director of the Newport-based Midwater Trawlers Cooperative, said cooperative members were “deeply concerned” about what seemed a “full steam ahead” rush to reintroduce log shipping without considering the potentially negative impacts on commercial fishing, the port, and the community. The cooperative represents 26 midwater trawler catcher vessels, 17 of them homeported in Newport. Many are part of Oregon’s distant water fleet, spending much of the year fishing in the Gulf of Alaska or the Bering Sea. Nearly all of them currently use the international terminal to some extent, because it can better accommodate larger boats of 100 feet or longer.

As many as 15 vessels at a time moor at the terminal during peak fishing activity between November 1 and January 10, and April 1 to May 15.

“There is currently no other place in the port that can adequately accommodate these large vessels and provide not just the space they need, but the shore power and other services they require,” Mann noted.

Fishermen and others agree that cargo shipping should have a berth at the terminal, but not at the expense of the fishing industry or the port itself.

They said the agreements, as written, give shipping vessels exclusive access to the terminal berths – a move they deemed “nonsensical” since it would virtually shut off their access to the terminal docks during their most critical fishing times. They also claimed the agreements are “structurally flawed” and so one-sided that they “could put the port in a perilous financial situation.”

“Even if you take commercial fishing out of it, the current deals are flawed,” she said.

Fred Yeck has homeported his 124-foot trawler F/V Sea Dawn in Newport since 1987, but for the past 20-plus years, shipyards in the area were too small to keep and service his vessel. With the improvements to the international terminal, he has brought his vessel back to Newport, but wants to make sure space remains available. He said he doesn’t oppose shipping, but does oppose the “bad shipping deal” he believes this one is, because it puts the port at risk, which makes no sense. He said it is not “fiscally responsible or acceptable” and questioned why port officials were lingering over “a dead deal.”

Land-Based Perspective

Port officials said timing was critical, the process to reach this point has been difficult, and failure to act could permanently scuttle any effort to bring back shipping.

“The intent was that the entire terminal would be multi-use, and that there would be no exclusive use, either for fishing or for shipping,” said Kevin Greenwood, the port’s former general manager.

The port incurred additional debt to finance what ultimately became a $28 million project to rebuild the international terminal. Apart from the general obligation bonds, the port has $5 million in outstanding traditional debt with $441,000 in annual debt payments. Operations at the terminal cost another $162,000 annually, boosting total annual expense to $603,000. Fees from the fleet for moorage and services - about $380,000 annually – don’t cover operating costs, and the port must draw from its reserves or subsidize the shortfall from other operations.

Small woodlot owners, along with timber and onshore services representatives, urged the port commissioners to ink the deal immediately and chart a course for the future before the opportunity eluded them.

Yale Fogarty with the International Longshore & Warehouse Union said the port “needs to diversify,” the community “needs jobs,” and it’s the port commission’s responsibility “to figure out how to make it work.” Dredging funds, he added, are based more on cargo than fishing. Shipping would also bring new family wage jobs and millions in revenue to the community, and fishing and shipping can coexist and expand.

A New Direction

The standoff reached an apex during a contentious and sometimes confrontational June 27 special meeting, when port commissioners deferred any final decision on the pending agreements until newly-elected commissioners Sara Skamser and Jeff Lackey began their terms on July 1. Several observers say the tempest over the shipping contract helped spawn the change in commission make-up, which some see – positively or negatively, depending on one’s perspective - as more receptive to the concerns of commercial fishermen in this situation.

Skamser called it a reckless money deal with no guarantees, because the port is “taking all the risks and debt,” and port officials must consider the on-going needs of existing users, including the commercial fishermen. Lackey said they should start over using outside legal, financial, and negotiating input and assistance, especially for contract negotiations of such magnitude.

Both say the port must improve transparency and efficiency of the public input process during any future efforts to add import and export functions at the international terminal.

After considerable discussion, the commission voted, 3-2, on August 22 to reject the three shipping agreements “in their current form” with Teevin and Silvan, along with the three-party agreement, “without further consideration.”

The turmoil also led to Greenwood’s resignation in July, and the appointment of Aaron Bretz, the port’s director of operations, first as interim general manager, then as general manager pro tem.

“The recent election of two new port commissioners signified a change in direction for the port and, as such, the commission felt a change in port leadership was also necessary,” the commission’s public announcement stated, noting Greenwood’s efforts “in guiding the port at a time when it is facing challenging issues.”

Most of those issues involve finances and resources as they relate to infrastructure and services, and the shipping contract decisions provided an undertow.

With the shipping agreements essentially dead in the water, the port lost a related $2 million federal grant. During an August 28 meeting in Newport with representatives of the Maritime Administration of the U.S. Department of Transportation, port officials were denied a requested extension to meet established requirements to keep the grant, most notably failing to have committed funds and a financially viable plan in place.

Patricia Patrick-Joling, commission president, said she couldn’t agree to such a risky deal financially for the port.

“Ports lose grants and subsidies all the time,” she noted. “It’s ebb and flow, it comes and goes.” If the port has a viable plan, she added, they would have a great chance of obtaining other grants to pursue other opportunities.